THE Bank of England needs to “create a recession” to get rampant inflation under control, an adviser to Chancellor Jeremy Hunt suggested yesterday.
The UK has so far dodged a downturn as the economy has been stronger than gloomy estimates had predicted.
However, unexpectedly strong inflation figures have led top economists to suggest the Bank will have to make life more difficult for millions so price rises can fall.
Karen Ward — part of a four-strong “wise persons” council to Mr Hunt — said the Bank had to “create uncertainty and frailty”.
She added: “It’s only when companies feel nervous about their future that they think, ‘well maybe I won’t put through that pay rise’. Or workers when they feel less confident about their job think, ‘I won’t push my boss for extra pay’.”
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She told the BBC’s Today programme: “It’s that weakness in activity which eventually gets rid of inflation.”
The Government has set a target of cutting inflation to five per cent by the year’s end but it remains at 8.7 per cent.
The Bank is poised to raise interest rates again today.
It could keep doing so to heap pain on mortgage holders as a way of forcing households to tighten their spending.
Inflation has been hard to shift because of a tight labour market, with high levels of employment and vacancies. As a result, firms are having to pay more to recruit workers.
The Ukraine war sparked the energy crisis and led to staff wanting higher pay to meet rising bills.
Firms then had to cover higher wages with price hikes.
Halfords tready to go places
HALFORDS has launched a buy now, pay later scheme to help motorists fund repairs after it found almost three in four of them have tyres which are unsafe or with poor tread.
Customers at the auto parts and bikes chain can settle up next year interest-free if they pay a 15 per cent deposit.
Boss Graham Stapleton said it would help drivers who are delaying maintenance due to the cost of living.
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Some 77 per cent of Halfords’ sales are now motoring-related, with auto sales up 61.2 per cent in the year to the end of March.
Cycle sales, which include Olympian Victoria Pendleton’s brand, fell 11.2 per cent as Covid-related demand tailed off.
Overall, annual profits fell 43 per cent due to inflation but Mr Stapleton said market share was rising as pressures eased, meaning higher profits this year.
Shares rose more than 5 per cent.
GOLDEN GOODBYE TO SHARES
THE tycoon behind e-commerce firm THG has given up his “golden share” in an effort to address shareholder concerns.
It gave Matt Moulding the power to block hostile takeovers.
But he has been saying since last year that he would ditch the special share so the firm could qualify for a London main market listing.
During that time the company, which owns businesses including MyProtein, Espa, Coggles and tech arm Ingenuity has rejected three separate takeover approaches.
THG has also addressed concerns about the independence of director Iain McDonald, who tried to buy the business last year.
He is stepping down from the pay committee but is remaining on the board. Helen Jones is joining from Premier Foods.
THG said that it was no longer losing money, but wasn’t making any yet.